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Where do people buy NFTs?
Digital artwork can be purchased from online marketplaces such as Opensea.io, Niftygateway.com, and Superrare.com.
Popular traditional auction houses have also entered the space: At Christie’s recent sale, a digital artwork was priced at $69 million. Meanwhile, Sotheby’s announced this month that it is launching its own NFT marketplace.
“We are uniquely positioned at Sotheby’s to apply our expertise and care to the burgeoning world of digital original generation art,” said Sebastian Fahey, managing director of the auction house.
How big is the NFT market?
How are NFTs priced?
“In the end, that’s what you can get away with,” Schachter said.
However, the artist’s reputation, including his gallery exposure and next size, are big factors.
How are they taxed?
NFTs are usually taxed according to the IRS’s collection rate, explained Shehan Chandrasekera, a certified public accountant and head of tax strategy at crypto tax software company Cointracker.io.
This means that appreciation for digital artwork kept for less than a year will be taxed at up to 37%, and those owned for longer will be taxed at a maximum rate of 28%.
One of the important things to note, Chandrasekera said, is that if someone uses cryptocurrency to buy NFTs, they will also be affected by capital gains taxes on gains made from their cryptocurrency.
“A lot of people don’t realize that,” he said. They think, ‘I just used my cryptocurrency. I didn’t get my money back.” People should be very careful about that.
Why do people often buy NFT with cryptocurrency?
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Schachter said that there is simply too much overlap between those interested in cryptocurrency and those interested in NFTs. “These are the digital natives who live on the Internet.”
And a lot of people who have seen their cryptocurrency rise in value have had few ways to spend it yet. It is not easy, for example, to buy a house or a car with Bitcoin or Ethereum.
“There was this crazy demand, and now all of a sudden there is something to buy,” Schachter said.
What are the criticisms?
Schachter argued that much of the criticism of NFTs comes from the traditional art world because it is afraid of disruption.
“The first order to attack is just to equate it with a currency,” Schachter said. “It’s just money.” Well, what’s more money than art stored in a never-before-seen free port? “
Other naysayers argue that art should be observed in museums and in person and not on screens. “But there are actually devices dedicated to looking at NFTs on your desk,” Schachter said. “It’s a standalone device that plays your NFTs in a loop.”
Skeptics still abound.
Anil Dash, an entrepreneur who writes about NFTs, said the space is dominated by people who hide their desires to make money in a passion for art.
“These are many of the same people who buy Mimi’s stock,” Dash said. “They don’t think GameStop will suddenly be really good at selling video games any more than they think this shoddy monkey graphic has any financial value.”
What are the risks?
Schachter said that buyers should be really careful about storing their digital artwork online, but he said this is no different from how one should approach their online bank accounts.
Counterfeiting is another issue, he said: “The more money there is on the table, there will be criminality.”
However, the main risk is that you lose all your money because the digital artwork loses its value.
Is it really art?
There have already been NFT fairs in a number of major cities, including London and Cologne.
In the meantime, a museum dedicated to NFTs will soon be coming to Midtown Manhattan.
“The genie is out of the bottle, and this one will only grow,” said Schachter.
Instead of replacing old art forms such as sculpture and painting, he said, technology will coexist with them.
“There will be 3D holograms of sculptures where you just tap a switch while he’s sitting in your room,” he said.